Call +44 207 306 0102 or contact us

Mount Eden Land Limited v Bolsover Investment Limited [2014] EWHC 3523 (Ch)

Published May 2015

Unreasonable Withholding of Consent? Mount Eden Land Limited v Bolsover Investment Limited [2014] EWHC 3523 (Ch)

John Furber QC acted for the successful tenant

It is well established that a landlord considering an application for consent to an assignment or to the making of alterations usually needs to consider only his own property interests and will act reasonably in refusing consent if what is proposed could be considered by a reasonable landlord to be detrimental to those interests (see International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd [1986] Ch. 513 and Iqbal v Thakrar [2004] 3 EGLR 21).

Two cases decided in the Court of Appeal in 1976 might suggest that a landlord can as a rule reasonably refuse consent to a proposal if he reasonably considers that it might result in statutory enfranchisement and thus the loss of the landlord’s interest. These are Norfolk Capital Group Ltd v Kitway Ltd [1977] 1 QB 506 and Bickel v Duke of Westminster [1977] 1 QB 517. These were decisions relating to the provisions of the Leasehold Reform Act 1967 as they then were. Since then those provisions have been substantially amended and numerous other statutes permitting enfranchisement by residential lessees now exist (including collective enfranchisement under the Leasehold Reform Housing and Urban Development Act 1993).

Mount Eden Land Limited (landlord) v Bolsover Investments Limited (tenant) is of interest in that it shows that the 1976 cases are no authority for any general propositions relating to the possibility of enfranchisement (as explained below). However, the facts of the case were unusual.

The facts

The tenant had a long lease of premises at 19 Bolsover Street, London W1 with some 900 years unexpired. The premises were at all material times used as serviced offices but the tenant proposed a redevelopment to provide 16 or 17 residential flats. Landlord’s consent to the proposed alterations was required but could not be unreasonably withheld. Such consent was refused and one of the grounds of refusal (relating to the 16 flat proposal) was as follows:

“In the event that the proposed residential units were to be held on long leases, it would give rise to the possibility of the tenants claiming extended leases. It is our client’s policy not to grant consent to conversion of commercial properties into residential because of the potential difficulties if the opportunity arises in the future for our client to acquire the property where there are residential long leases”.

In refusing consent to the 17 flat proposal, the landlord added this ground:

“Further, our client is concerned at the possibility of the lessees of the proposed residential units applying for collective enfranchisement which would, amongst other things, lead to our client losing the current control of the building”.

Thus, rather belatedly, the enfranchisement possibility was raised as a ground for refusing consent to the proposed alterations.

The decision at first instance

The trial judge (H.H. Judge Birtles in the Central London County Court) dealt with this ground briefly. He accepted that it was possible that, if the flats in the altered premises were let on long leases, the tenants of those flats might combine together to exercise a statutory right to collectively enfranchise. He also accepted that there was ample authority for the proposition that this was a reasonable consideration for the landlord to take into account. However, having regard to answers given by the landlord’s representative in cross-examination, including agreement that the possibility was “wholly speculative”, he decided that he could not accept that a reasonable landlord would take it into account in refusing consent for the proposed alterations.

The decision on appeal

On appeal, counsel for the landlord relied, amongst other arguments, upon passages in the judgments of members of the Court of Appeal in the 1976 cases. Mr. Isaacs QC (sitting as a deputy judge in the Chancery Division) first found that Judge Birtles was, on the facts of the case, entitled to reach his conclusion that the enfranchisement possibility was “wholly speculative”, not only by reference to the evidence of the landlord’s representative, but also “because that evidence was an accurate reflection of the position, having regard to such considerations as the number of long leases that might be granted and the likelihood of the lessees grouping together collectively to enfranchise the leasehold interest” (para. 16).

His second finding is of more general interest (para. 17). He held that the 1976 cases did not assist the landlord in this case:

“they are not authority for the proposition that a landlord is not acting unreasonably in seeking to preserve its property interests and to avoid the possibility of those interests becoming susceptible to compulsory acquisition”.

In effect, he distinguished the 1976 cases, because the regime under the 1967 Act was materially different from the regime under the 1993 Act in relation to the provisions made for compensation to be paid to the landlord and also because the leases considered in the 1976 cases were of much shorter duration than the lease in this case. The extent of the financial consequences to the landlord was relevant. Finally, he held that the expressed concern relating to loss of control did not in the circumstances of the case make the refusal of consent reasonable (para. 18).

Conclusions

What can be drawn from this history? The actual result of the case obviously depended on the unusual facts. However, the observations in para. 17 of the judgment quoted above are of general importance. The decisions in the 1976 cases cannot be relied upon as the sole basis of any objection made by reference to the possibility of enfranchisement. In each case, the impact of the possibility upon the landlord’s interest must be considered and evaluated, having regard to the relevant statutory provisions and the facts of the case.

 

 

Read the next article (Hardy v Griffiths)>>